3 Key Factors Affecting Home Affordability

Over the past year, a lot of people have been talking about housing affordability and how tight it’s gotten. But just recently, there’s been a little bit of relief on that front. Mortgage rates have gone down since their most recent peak in October. But there’s more to being able to afford a home than just mortgage rates.To really understand home affordability, you need to look at the combination of three important factors: mortgage rates, home prices, and wages. Let’s dive into the latest data on each one to see why affordability is improving.1. Mortgage RatesMortgage rates have come down in recent months. And looking forward, most experts expect them to decline further over the course of the year. Jiayi Xu, an economist at Realtor.com, explains:“While there could be some fluctuations in the path forward … the general expectation is that mortgage rates will continue to trend downward, as long as the economy continues to see progress on inflation.”And even a small change in mortgage rates can have a big impact on your purchasing power, making it easier for you to afford the home you want by reducing your monthly mortgage payment.2. Home PricesThe second important factor is home prices. After going up at a relatively normal pace last year, they’re expected to continue rising moderately in 2024. That’s because even with inventory projected to grow slightly this year, there still aren’t enough homes for sale for all the people who want to buy them. According to Lisa Sturtevant, Chief Economist at Bright MLS:“More inventory will be generally offset by more buyers in the market. As a result, it is expected that, overall, the median home price in the U.S. will grow modestly . . .”That’s great news for you because it means prices aren’t likely to skyrocket like they did during the pandemic. But it also means it’ll probably cost you more to wait. So, if you’re ready, willing, and able to buy, and you can find the right home, purchasing before more buyers enter the market and prices rise further might be in your best interest.3. WagesAnother positive factor in affordability right now is rising income. The graph below uses data from the Federal Reserve to show how wages have grown over time: If you look at the blue dotted trendline, you can see the rate at which wages typically rise. But on the right side of the graph, wages are above the trend line today, meaning they’re going up at a higher rate than normal.Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage. That’s because you don’t have to put as much of your paycheck toward your monthly housing cost.What This Means for YouHome affordability depends on three things: mortgage rates, home prices, and wages. The good news is, they’re moving in a positive direction for buyers overall.Bottom LineIf you're thinking about buying a home, it's important to know the main factors impacting affordability are improving. To get the latest updates on each, let's connect. Aurhomes Group is here to help!

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Why Pre-Approval Is Even More Important This Year

On the road to becoming a homeowner? If so, you may have heard the term pre-approval get tossed around. Let’s break down what it is and why it’s important if you’re looking to buy a home in 2024.What Pre-Approval IsAs part of the homebuying process, your lender will look at your finances to figure out what they’re willing to loan you. According to Investopedia, this includes things like your W-2, tax returns, credit score, bank statements, and more.From there, they’ll give you a pre-approval letter to help you understand how much money you can borrow. Freddie Mac explains it like this:“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”Now, that last piece is especially important. While home affordability is getting better, it’s still tight. So, getting a good idea of what you can borrow can help you really wrap your head around the financial side of things. It doesn’t mean you should borrow the full amount. It just tells you what you can borrow from that lender.This sets you up to make an informed decision about your numbers. That way you’re able to tailor your home search to what you’re actually comfortable with budget-wise and can act fast when you find a home you love.Why Pre-Approval Is So Important in 2024If you want to buy a home this year, there’s another reason you’re going to want to be sure you’re working with a trusted lender to make this a priority.While more homes are being listed for sale, the overall number of available homes is still below the norm. At the same time, the recent downward trend in mortgage rates compared to last year is bringing more buyers back into the market. That imbalance of more demand than supply creates a bit of a tug-of-war for you.It means you’ll likely find you have more competition from other buyers as more and more people who were sitting on the sidelines when mortgage rates were higher decide to jump back in. But pre-approval can help with that too.Pre-approval shows sellers you mean business because you’ve already undergone a credit and financial check. As Greg McBride, Chief Financial Analyst at Bankrate, says:“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”Sellers love that because that makes it more likely the sale will move forward without unexpected delays or issues. And if you may be competing with another buyer to land your dream home, why wouldn’t you do this to help stack the deck in your favor?Bottom LineIf you’re looking to buy a home in 2024, know that getting pre-approved is going to be a key piece of the puzzle. With lower mortgage rates bringing more buyers back into the market, this can help you make a strong offer that stands out from the crowd.

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The Top 5 Reasons You Need a Real Estate Agent when Buying a Home

You may have heard headlines in the news lately about agents in the real estate industry and discussions about their commissions. And if you’re following along, it can be pretty confusing. But here’s the thing you really need to know – expert advice from a trusted real estate agent is priceless, now more than ever. And here’s why.A real estate agent does a lot more than you may realize.Your agent is the person who will guide you through every step when buying a home and look out for your best interests along the way. They smooth out a complex process and take away the bulk of the stress of what’s likely your largest purchase ever. And that’s exactly what you want and deserve.This is at least a part of the reason why a recent survey from Bright MLS found an overwhelming majority of people agree an agent is a key part of the homebuying process (see visual below):To give you a better idea of just a few of the top ways agents add value, check out this list.1. Deliver Industry ExperienceThe right agent – the professional – will coach you through everything from start to finish. With professional training and expertise, agents know the ins and outs of the buying process. And in today’s complex market, the way real estate transactions are executed is constantly changing, so having the best advice on your side is essential.2. Provide Expert Local KnowledgeIn a world that’s powered by data, a great agent can clarify what it all means, separate fact from fiction, and help you understand how current market trends apply to your unique search. From how quickly homes are selling to the latest listings you don’t want to miss, they can explain what’s happening in your specific local market so you can make a confident decision.3. Explain Pricing and Market ValueAgents help you understand the latest pricing trends in your area. What’s a home valued at in your market? What should you think about when you’re making an offer? Is this a house that might have issues you can’t see on the surface? No one wants to overpay, so having an expert who really gets true market value for individual neighborhoods is priceless. An offer that’s both fair and competitive in today’s housing market is essential, and a local expert knows how to help you hit the mark.4. Review Contracts and Fine PrintIn a fast-moving and heavily regulated process, agents help you make sense of the necessary disclosures and documents, so you know what you’re signing. Having a professional that’s trained to explain the details could make or break your transaction, and is certainly something you don’t want to try to figure out on your own.5. Bring Negotiation ExpertiseFrom offer to counteroffer and inspection to closing, there are a lot of stakeholders involved in a real estate transaction. Having someone on your side who knows you and the process makes a world of difference. An agent will advocate for you as they work with each party. It’s a big deal, and you need a partner at every turn to land the best possible outcome.Bottom LineReal estate agents are specialists, educators, and negotiators. They adjust to market changes and keep you informed. And keep in mind, every time you make a big decision in your life, especially a financial one, you need an expert on your side. Expert advice from a trusted professional is priceless. Let’s connect today. 

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